I have searched the Threads, and read section 226.23 of Reg Z, and the corresponding Commentary and am not sure what the answer is to this question? We have a residential construction loan to a consumer. There have been cost overruns, and now they need additional funds to finish the construction. They plan to occupy the house as their principal dwelling when construction is complete. The note and mortgage were modified and increased to include the original amount, plus the new funds for the overruns.

Big question - does the right of rescission apply to the new funds being advanced for the overruns - or would it still be considered part of the residential mortgage transaction and exempt from ROR? The borrowers currently occupy another house as their principal dwelling, and it has not been pledged as part of the collateral on this construction loan.

Thanks for any help on this, or providing a link to where this situation has been previously discussed.

I'll take a stab - since it isn't their primary residence at the moment I'd say rescission doesn't apply. Also when they do go from construction to permanent rescission won't apply because it will be a residential mortgage transaction.

This should be a continuation of the RMT exception. No RoR.

I was just asked this same question and when I did a search I was surprised to find the thread posted only yesterday. Just one twist on our situation. We are not doing a modification of the construction loan. We are doing a refinance with new documents. Now does rescission apply?

I still think you are dealing with a residential mortgage transaction. Therefore, no rescission.